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Digital KYC: A Key to Transform

Traditionally Financial Institutions have been collecting application forms along with the physical supporting documents like Proof of Identity, Proof of Address, Proof of Birth, Certificate of Incorporation, Memorandum of Association, etc., from their customers in order to fulfil the KYC (Know Your Customers) Norms. KYC cannot be considered as a one-time process, it is a recurring process, where Customers and FI’s are required to adhere to the KYC Norms prescribed by the Regulators. It is not only the process of collection, it is also a process of maintaining updated records.

FI’s spend a lot of money / resource / time to collect, as well as maintain the physical copies of KYC records. This is creating a burden and additional work for the Financial Institutions. Maintaining Physical records have created a limitation for the Banks towards serving the customers. Some of them are as follows:

a)      Single KYC view of a customer not available within the various departments of a Financial Institution as KYC through physical documents were restricted to a particular department only

b)      Erroneous details being updated in the system without sufficient supporting documents

c)      KYC documents being misplaced

d)      Cumbersome and time consuming document collection process

All these lead to non-compliance of KYC, resulting in tarnished brand image which is associated with huge penalties for FI’s. It also results in additional fee costs, legal disputes and cash delays towards the customers during their transaction processing. Due to this Financial Regulators are enforcing FI’s to be KYC compliant.

Digitization, has subjected banks to undergo transformation to a larger extent. The effect of technology take-off on society along with the entry of fintech start-ups catering to banking services have exposed banks to huge competition thereby introducing more virtual touch points that renewed the focus of banks on developing and engaging customer relationships rather than being stereotyped as mere transaction enablers. Digitization in banks is a key to a more meaningful and successful KYC compliance. Digitization will ensure centralization of KYC, which may result in negating bottle necks during Internal and external audits, client on-boarding, transaction processing and many more.   

The digitization process can help Institutions in a way to provide an easy and hassle free process towards the KYC maintenance, as well as fulfil the Regulatory Requirements. Additionally it also help the Institutions to serve the customers in an easy and friendly manner.

Advantages of digital KYC:

Digitization of KYC (e-KYC) can lead to the below mentioned advantages for a bank:

a)      Paperless KYC: The fully digitized platform eliminates the need for paper documents. However as per country specific, regulatory requirements to be fulfilled by the Institutions.

b)      Consent Based KYC to avoid identity thefts: KYC is undertaken with the explicit consent of customers and thereby overcomes the risk of identity thefts.

c)      Real-time verification eliminates document forgery: To eliminate document forgery, real-time digital verification and confirmation of identity and address data.

d)      Adequately parameterized: It allows to configure Institution specific Proof of Address (POA) and Proof of Identity (POI).

e)      Simple user interface: Allows users to easily navigate through intuitive hyper linking with minimum number of clicks to access a customer’s KYC.

f)       Highly secure: Role-based access control system ensures that only authorized users can have access to specific documents.

g)      Single window KYC: e-KYC can be leveraged across all LOB’s of the FI, ensuring consistency, reducing TAT and thereby enhancing customer satisfaction.

 To conclude, the KYC collection and Maintenance process can be upgraded with the help of Digitization, which would benefit everyone. The future has the possibility to replace the entire manual, paper based, time consuming, expensive and inefficient process needed to maintain up to date records of customers. Digitizing the process will provide an immense opportunity to maintain accurate information, at a low cost that is continually updated for any one (with permission) and can make transacting on the internet a processes with genuine trust between parties.

Digital KYC
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Comments: (6)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 12 April, 2016, 13:15Be the first to give this comment the thumbs up 0 likes

It's a no-brainer that digital KYC alleviates the rampant consumer-side and bank-side pains extant in the current paper-based KYC process. I've heard vendors and thought leaders alike advising banks to switch to digital KYC for at least two decades. Still, going by my RE-KYC process with two different banks in the last month, there's no sign that paper-based KYC process is going away anytime soon. Any idea why an idea who time came so long ago is still not able to find adoption? I can't believe it's because banks are supposedly slow - even by their usual standards of speed, too much time has elapsed without any change.

Prasenjit Das
Prasenjit Das - NIIT Technologies Limited - Noida , India 18 April, 2016, 08:242 likes 2 likes

SBI is already there ..........Under the e-KYC facility, e-KYC certificate is generated as an identity document. Fingerprints of the customer are captured and sent to UIDAI for authentication of identity and address proof. On successful verification from UIDAI, the e-KYC service will respond to display demographic details. 

Hitesh Thakkar
Hitesh Thakkar - FIS Payments Software and Services India - India 18 April, 2016, 14:451 like 1 like

After Aadhar registration accelerated, Govt has started e-KYC norms and appointed KSA (KYC Service Agency e.g NSDL, CDSL, NPCI etc.) which does authentication received from registered KUA (KYC User Agency i.e. banks, telecom operator, insurance agencies etc.)

KUA such as bigger banks such as SBI has started leveraging it for its BC model - PAYPOINT uses extensive (http://paypointindia.com/Banking.aspx)

New format of SBI branches under SBI INTOUCH has Account opening Kiosk which uses Aadhaar based e-KYC feature.

I was instrumental in design and development with one of solution provider apart from advocating it to several new enterents.

Chillr - Mobile wallet provider has also offered solution to Federal bank (https://blog.chillr.in/2016/02/18/open-a-bank-account-with-a-selfie/). 

This may be started point to see new enterent who does not have baggage of Digital e-Forms floating around in branches and DSA to process using Document management to use it.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 18 April, 2016, 16:332 likes 2 likes

@PrasenjitDas:

TY for your input. Coincidentally, I was going to visit an SBI branch today (situated in a building where your company has many offices, BTW), so I thought of inquiring about e-KYC. The person at the inquiry counter and the CRM Manager had no clue but referred me to the Branch Manager. She confirmed exactly what you've said and offered to demo the feature for me. Just for the benefit of those who might be interested in knowing how exactly this works:

Prospective customer walks in to open a new account. S/he enters two fingerprints on a fingerprint reader. BM enters prospective customer's Aadhaar # on the e-KYC software. A facsimile of his / her Aadhaar card comes up on the screen. BM fires a print out of this. Prospective customer signs this paper and the paper-based account opening form in wet ink. That's it. There's no need to carry any paper-based Proof of Identity and Proof of Address. 

Prasenjit Das
Prasenjit Das - NIIT Technologies Limited - Noida , India 18 April, 2016, 17:521 like 1 like

@Ketharaman ... Great that it has percolated down to operational level .The e KYC is getting cascaded to mobile as well where you can have your mobile activated in few minutes . 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 18 April, 2016, 18:371 like 1 like

@PrasenjitDas: TY for your input re. mobile. Personally, I'm still on the same postpaid mobile phone subscription I bought 13 years ago and have no intention to buy another one anytime soon but I can see how eKYC-based immediate activation of new mobile connections will help people that change prepaid connections once every few months.

Sujay Puttanna

Sujay Puttanna

Business Analyst / SME (Retail Banking)

Mindtree Ltd.

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23 Dec 2015

Location

Bangalore

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